Liz Truss is leading perhaps the most rightwing government in modern British history, with an economic plan shaped by ideology rather than evidence, the Liberal Democrat leader, Ed Davey, has warned before this week’s mini-budget.
Davey, whose party’s annual conference was cancelled because it coincided with the Queen’s funeral, told the Guardian that Truss’s decision to style Friday’s announcement as a “fiscal event” rather than a budget seemed to be aimed at preventing the independent Office for Budget Responsibility (OBR) scrutinising its impact.
“The failure to have an OBR assessment shows the economy is being run by ideology, not a plan,” Davey said. “They clearly don’t want the evidence, because that would be unhelpful to their argument. And that should trouble everybody.”
Truss’s defence of tax cuts that will disproportionately help richer people, in the hope the measure will grow the wider economy and allow wealth to gradually spread down the income scale was, Davey added, based on “a fabrication of rightwing economists”.
Truss’s chancellor, Kwasi Kwarteng, is expected to unveil tax cuts of between £30bn and £50bn, including the cancellation of a planned rise in corporation tax from 19% to 25%.
An analysis of the corporation tax plan commissioned from the House of Commons library by the Liberal Democrats has shown that banking would benefit more than any other sector, saving banks an estimated £6.3bn in tax payments over the next two years.
Davey, whose party has taken three previously safe Conservative seats in byelections over the past 18 months by appealing to disillusioned Tory voters, said that while the Lib Dems would expect Truss’s policies to further hasten this phenomenon, he was principally worried for the future of the UK under her prime ministership.
“She is saying some of the most extraordinary ideological things. She has appointed probably the most rightwing government in modern history. And it seems completely out of touch,” he said.
Extending a windfall tax on oil and gas companies to part-finance the government scheme to limit the rise of energy bills was “just a no-brainer from an economics and business point of view” but had been rejected by Truss, Davey noted, while she was instead planning to end a cap on bankers’ bonuses.
He said: “It is just a sensible, moderate, progressive thing to do, especially given the alternative is to borrow. They are now the borrow and spend party. And that is highly risky for our economy – for interest rates, and for the future stability of jobs and growth.
“They’re now going to slash taxes, mostly for businesses and the better off, as far as we can see. You have families struggling across the whole country; you have small businesses going to the wall, or not knowing if they can survive, but apparently the biggest concern of the Conservatives is bankers, banks and oil and gas companies.”
The Lib Dems have called for a focus on insulating homes, wider energy-efficiency measures and renewable sources of power, with Davey calling this “a serious, sensible plan” that would tackle climate breakdown and create large numbers of local jobs.
“They’re setting their face against that, and wanting deregulation, tax cuts for the multinationals and the wealthiest, and suddenly trickle-down is going to promote growth,” he said. “It’s almost a caricature of rightwing nonsense.”
Truss seemed similarly neglectful of policies for trade or the needs of small businesses, Davey said. “All those sorts of things seem to be the bread and butter of a serious economic plan, but they’re out with the fairies, with extreme-right economists. It’s extraordinary. I’m scratching my head to think what is the vision. Who on earth are they listening to? It looks like they’re completely out of touch.”
He added: “We saw lifelong Conservatives alarmed at Boris Johnson’s deceit and dishonesty. I think those lifelong Conservatives will be even more alarmed at the disregard of facts and evidence by this government, and the fact they are playing fast and loose with our economy.”
The fact that Truss had been elevated to No 10 through an internal Conservative election and was now pursuing notably different policies to Johnson meant she had no proper mandate, Davey said.
“I think Conservative MPs need to look in the mirror, and look in their conscience,” he said. “They were elected on a different manifesto. Just months ago they were voting for completely the opposite policies. I really hope they will find it in them to oppose this sharp swing to the right.
“It’s genuinely worrying for the country. These are difficult times and you want calm, stable, evidence-based politics. And we’re not getting that.”
The Lib Dems had been due to gather in Brighton from last weekend for what would have been the party’s first fully in-person conference since before the Covid pandemic, but cancelled the event because it clashed with the Queen’s funeral.
This was, Davey said, frustrating but inevitable: “As soon as we knew that the funeral was going to take place on the Monday, we just said, ‘Right, let’s make other arrangements.’ We had to go through some formalities internally, but it wasn’t a question. But we will have our moment.”